Stock market news: September 3, 2019

Heidi Chung

Stocks tumbled across the major indices to kick off the first trading day of September, after the 15% U.S. tariffs on about $110 billion worth of Chinese imports went into effect and new data illustrated a weakening manufacturing sector.

Here were the main market moves, as of market close:

  • S&P 500 (^GSPC): -0.69%, or 20.19 points

  • Dow (^DJI): -1.08%, or 285.26 points

  • Nasdaq (^IXIC): -1.11%, or 88.72 points

  • Crude oil (CL=F): -2.07% to $53.96 per barrel

  • Gold (GC=F): +1.60% to $1,553.90 per ounce

The summer has drawn to a close, and the wild swings in August are officially over. But if history is any indication, there may be more pain ahead for stocks in September. Since 1950, September has been the worst month for the S&P 500 with an average decline of 0.5% during the month, according to LPL Financial. “August was a burst of volatility for most investors, and we expect that to continue in September,” LPL Financial’s Senior Market Strategist Ryan Detrick noted in an email to Yahoo Finance. “But if you’re looking for some good news, the past 15 times stocks were lower in August, the rest of the year was actually higher every single time.”

The volatility in August was largely due to recession fears and the ongoing U.S.-China trade war, and the trade tensions are showing no signs of cooling off. Investors are antsy, and the implied open on Tuesday is an indication that the trade war will continue to have a meaningful impact on the markets so long as the two nations fail to reach some sort of agreement.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York. REUTERS/Eduardo Munoz

Trade war rages on

Sunday, the U.S. went forward with its tariffs on more Chinese goods, and this time, the U.S. consumer is likely to start feeling the heat directly. President Donald Trump took to Twitter Tuesday morning to express his view on the current status of trade war negotiations with China.

According to Bank of America Merrill Lynch, since Trump took office in 2016, when Trump’s Twitter activity spikes, it’s not so good for the market. “Trade talk, political campaigning and tweets have contributed to volatility, from China to Fed policy to tax policy. Since 2016, days with more than 35 tweets (90th percentile) by President Trump have seen negative returns (-9bp), whereas days with less than 5 tweets (10th percentile) have seen positive returns (+5bp) - statistically significant,” the bank wrote in a note Tuesday.

Nevertheless, while the trade war weighs on the markets, some economists argue that the trade war has not had a real impact on the economy. “The trade dispute with China may be escalating at a rapid pace but, despite the concerns of Fed officials, there is still little evidence that this is having a significant impact on the economy,” Capital Economics wrote in a note Friday.

Economy: U.S. manufacturing sector contracts for first time in 3 years

New data released Tuesday morning revealed more trouble in the U.S. manufacturing sector. The Institute for Supply Management’s purchasing manager’s index (PMI) fell to 49.1 in August to its lowest level since January 2016. Readings above 50 imply expansion, while below 50 indicates contraction. The latest data illustrates the negative impact that slowing global growth and the ongoing trade war are having on U.S. producers. ISM’s new orders fell to 47.2, which was the first time that the gauge fell below 50 since December 2015.

“While slower global growth has been the main headwind facing US manufacturers over the past 12 months, the press release highlighted that the renewed escalation of trade tensions with China is starting to weigh more heavily on sentiment,” Capital Economics wrote in a note to clients Tuesday. “That will only reinforce the concerns of Fed officials over the impact of trade uncertainty on the economy, and provides another reason to think that another 25bp rate cut is coming at the FOMC meeting in two weeks’ time.”

Brexit drama

Meanwhile across the pond, the U.K. was dealing with its own political drama as the Brexit deadline of October 31 rapidly approached. Lawmakers in the U.K. returned from summer recess on Tuesday, and rebel lawmakers will have the opportunity to prevent a “no-deal” Brexit. However, if lawmakers attempt to block a potential “no-deal” Brexit, Prime Minister Boris Johnson threatened to call another snap general election come October 14. The pound (GBPUSD=X) fell to a 34-year low against the dollar but has since pared some of those losses.

Hurricane Dorian

In addition, Hurricane Dorian continued to threaten the eastern coast of the U.S. after ravaging the Bahamas over the weekend. Dorian is stalled over the Bahamas after barreling through the islands on Sunday as a category 5 hurricane. It has since been downgraded to category 2 but is expected to make its way along the East coast this week. From an investment standpoint, some analysts are expecting the natural disaster to boost certain home improvement retailers like Home Depot (HD) and Lowe’s (LOW), as well as auto parts retailers such as Advanced Auto Parts (AAP), AutoZone (AZO) and O’Reilly Automotive (ORLY).

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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